Researchers at the University of the Basque Country have found out that labor reforms that led to cutting dismissal costs and promoting temporary job contracts have not increased employment at all in Europe and in other continents, the university reported on May 21, 2020.

The university, also known as the Universidad del País Vasco (UPV)/Euskal Herriko Unibertsitatea (EHU), is a strong research institution that goes by the motto Eman ta zabal zazu (Give and extend knowledge) and conducts practically 90% of all researches in the autonomous Basque region of Spain. Researchers said that between 1990 and 2010 most of the economies, the European ones in particular, adopted various measures designed to reform their labor markets and made it cheaper to dismiss permanent employees and encourage the use of temporary contracts.

"These reforms were based on the belief that the serious unemployment problems facing these economies were due to the existence of various inflexibilities in the labor market which were hampering a rapid adjustment of these markets when responding to economic shocks," explained Josu Ferreiro, lecturer in the Department of Applied Economics V of the UPV/EHU's Faculty of Economics and Business, who undertook the study along with colleague Carmen Gómez, and Philip Arestis, a University of Cambridge lecturer, and looked into the impact of those labor measures on the markets of 11 European countries over a 25-year period, from 1988 to 2012.

“The changes introduced to reduce employment protection, in other words, by making it cheaper to dismiss people and by simultaneously promoting temporary contracts, have had no effect on the total employment rate, because what has happened is that temporary employment has increased a lot whereas indefinite employment has fallen hugely. The evolution in employment depends on economic growth alone, and only a higher rate of economic growth generates an increase in employment … the clearest effect that they in fact found on the job market as a result of the labor reforms was "the restructuring of employment that has taken place. A segmentation has taken place which means we can talk about two categories of workers: those who are on fixed or permanent contracts, and those on temporary contracts. They almost operate as if they were different job markets where the possibility of people on temporary contracts securing an indefinite contract is very remote. What is more, the conditions of work of temporary contracts are more precarious, firstly because the contracts are shorter and secondly because they pay less," Ferreiro concluded.